The UK is the most popular location for inward investment in Europe: the government organisation UK Trade and Investment reports that the UK currently attracts approximately 40% of the US, Japanese and Asian investment into the EU.
Where a foreign corporation wants to trade in the UK it has a number of options as to how to structure its operation and this guide is designed as an introduction to some of those options. It should not be treated as exhaustive nor relied on to provide answers to detailed questions.
This guide assumes that in setting up a UK presence the foreign corporation intends to trade in the UK whether or not it also trades elsewhere. If it intends to have no physical location in the UK and merely to conduct its business through a UK resident agent it will not have to register with the UK Registrar of Companies although, as discussed below, it will still need to consider the tax consequences of its UK operations. However, where a decision has been made to establish a more substantial UK presence there are three possibilities for the foreign corporation to consider.
Depending on its specific circumstances and preferences most foreign corporations will operate in the UK through either a wholly-owned subsidiary or by registering under one of the two parallel regimes provided for in the UK Companies Act 1985; the establishment of a place of business or the establishment of a branch. Although taxation is likely to be the overriding consideration, the ability to isolate its assets from a UK operation will, for some foreign corporations, be an important factor. From the comparison of these different options set out below it will be seen that there are advantages and disadvantages in each form of operation and that it is often a fine choice as to which form of operation will be best.
Establishing a partnership may be a further option for some inward investors but this is unlikely to be the preferred choice for an existing corporate entity unless it is considering a joint venture. Therefore this guide does not address the structure or tax treatment of partnerships but Bircham Dyson Bell can offer further advice on this as required.
Although this guide refers to the UK, it reflects company law relating to England and Wales but not specifically Scotland and Northern Ireland even though they are very similar. References to taxation apply to the whole of the UK. However, as a general commentary, this guide makes no reference to specific Double Tax Treaties. Therefore, where a Double Tax Treaty applies the general tax comments in the tax sections may need to be varied to take into account the specific provisions in the treaty.
The law is as stated in June 2008. However, it should be noted that company law in the UK is in the process of being amended. The Companies Act 2006 is being introduced in stages and the detailed regulations relating to overseas companies are expected to come into force on 1 October 2009.
The guide is divided into the following sections:
- Form of Business Operation
- Corporate Taxation
- General Corporate Matters
- Personal Taxation
- Procedure, Timetable and Conclusion
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